Two weeks ago, I looked at how the industry might modify its approach to electronic new business processing to make it more attractive for IFAs to use. The natural counter point to any such development is the electronic delivery to advisers of information on existing contracts.
Clients are always far more interested in the progress of the last product they bought on the adviser's recommendation than the prospects for any future contracts.
A great deal of work has been going on for some time in this important area. Several of the bigger IFA firms have been working together via the Adviser Technology Forum to drive forward delivery of electronic valuations.
At the same time, Origo has been developing the necessary XML data standards to make it possible for providers to distribute such information via a range of different software and service providers.
It is important to point out that there is a world of difference between a life office delivering such information – ideally using an industry standard – into an adviser's back-office system rather than just enabling an IFA to access valuations over the internet using a provider extranet.
The former delivers the information the adviser wants to the place where they store their main client information. The latter is simply a way of an insurer making the adviser do more work but saving the life office from having someone to answer the phone and respond to the enquiry.
Early versions of back-office integration involved links between the advisers' back office systems and providers' extranets. This was a significant improvement, enabling the adviser to request data by clicking an icon on their own system and removing the need for the IFA to have to print the information and retype it manually to their records.
The next logical step was to start using electronic messaging to get such information, with XML being the language of choice. A number of IFA back-office system providers are developing the ability to support such services. It is my understanding that 1st Software currently offers the widest coverage in this area, having active XML links with Axa, Scottish Life, Scottish Widows, Skandia and Prudential/Scottish Amicable.
A situation is rapidly developing where life offices which are not able to offer such functionality are becoming conspicuous in their absence. But is there a good reason for this?
In recent weeks, I have heard suggestions that many of the major names missing from the above list have reservations over the effect it might have on their overall systems if they suddenly allow IFAs to pull information electronically from the systems at will. I am never one to encourage delays to technology but their concern may be well founded.
There is a general rule of thumb now used in certain e-commerce circles in the US for scaling up for an e-service – think of the maximum possible volume of traffic that you believe you are going to receive and build 100 times that capacity.
Putting in systems of such size is not an overnight task and the alternative – hoping the existing infrastructure can help – is fraught with danger.
What is most important is that a mechanism is put in place that allows providers to deliver information on existing contracts to IFAs in an automated fashion so that advisers can have the details at their fingertips and can access it in seconds whenever they need it.
Without doubt, the most elegant solution is to use real-time XML messaging. However, insurers will need to make significant additional investment in their systems before they can offer such services in volume. We urgently need to find a short-term solution to the need for this information that does not involve resorting to using the phone.
It is not good enough for insurers to say to IFAs wait another 18 months before services are available. Equally, the adviser community must be realistic in what it is asking for. Does an adviser really need an up to date valuation for every client every day?
Clearly, there are situations where the latest valuation is desirable. In many cases, a value at the end of the previous month might be sufficient for the purpose. We are, after all, in the main, talking about long-term investment products.
The answer to me is relatively simple. There has long existed a standard for transferring large amounts of information to advisers, the old Origo bulk data download standard. Could those insurers which need to make additional investment before they are able to make XML messaging more widely available not start to make greater use of the old standard until such time as they are able to move to the new medium?
While it is desirable to use new technology, if there is an alternate solution in the short term it makes sense to use it. Taking such an approach would also buy more time for the actual move to the XML environment.
It should be recognised that the old bulk data standard has never been used properly by insurers and it would be essential for them to start making data available in a truly consistent form. There is some irony about the fact that the very people (insurers) who insist that they want everyone to use data standards are themselves all too often the worst at practicing what they preach.
To assist the advisers, it would probably be most effective if their client data were provided to their software providers, effectively acting as an outsourced data management service who could convert it to a format to be uploaded to the advisers system.
Today's reality is that we live in the 1 per cent world. Advisers are now being paid lower levels of commissions on an increasing range of products. Yet they are expected to operate on 21st Century income while receiving only 20th Century service. There is a real need to come up with a short-term solution that will save costs for advisers.
I am in no doubt that even such a short-term solution would also pay major dividends to insurers by enabling them to reduce the number of staff in their call centres.
To those insurers which are able to offer XML messaging today, I would say well done. To those which cannot, I suggest they must come up with a short-term solution rather than keep advisers waiting for the service they deserve.
Ian McKenna is a consultant and director of the Financial Technology Research Centre, which works for a wide range of industry organisations, life offices and technology companies, including Microsoft and The Exchange. He can be contacted by email at email@example.com
Tel: 020 7935 2599